Coin Burn

Coin burning is the result of sending a cryptocurrency token to an unusable wallet to intentionally remove it from circulation. No one can reach the “burned” address and this wallet cannot be assigned to anyone. A token sent to a burned address will be unusable forever.

The Logic of Coin Burning

Coin burning is the process of reducing total supply by permanently removing cryptocurrencies from circulation. We will use Binance Coin, the old BNB ERC-20, as an example to explain how the coin-burning process takes place.

While Binance Coin was on the Ethereum network, it held coin-burning events at regular intervals. The amount of BNB coins to be burned is based on the number of transactions executed on the exchange in a 3-month period. In other words, Binance burns BNB after each quarter based on total trading volume.

How Does Cryptocurrency Burning Work?

Basically, a token burning event takes place in the following order:

• A person who owns a cryptocurrency starts the burning function by stating that they want to burn a certain amount of coins.
• After that, the smart contract verifies that the coins are in this person’s wallet and that the specified number of coins is valid. The burning mechanism only allows positive numbers.
• If the person does not have enough coins or the specified number is invalid, the burn function will not take place.
• If there are enough coins in the wallet, the coins are removed from this wallet. Then the total supply of this coin is updated and the coins are burned permanently.
• If you implement the burn function to burn your coins, your coins will be destroyed permanently. It is not possible to recover coins after they have been burned, and thanks to blockchain technology, the actual burning can be easily verified via a blockchain browser.

Learn more about cryptocurrency burning and the proof-of-burn.